China Sold Second-Largest Amount Ever Of US Treasurys In December: And Guess Who Comes To The Rescue

While we will have more to say about the disastrous December TIC data shortly, which was released early today, and which showed a dramatic plunge in foreign purchases of US securities in December - the month when the S&P soared to all time highs and when everyone was panicking about the 3% barrier in the 10 Year being breached and resulting in a selloff in Tsy paper - one thing stands out. The chart below shows holdings of Chinese Treasurys (pending revision of course, as the Treasury department is quite fond of ajdusting this data series with annual regularity): in a nutshell, Chinese Treasury holdings plunged by the most in two years, after China offloaded some $48 billion in paper, bringing its total to only $1268.9 billion, down from $1316.7 billion, and back to a level last seen in March 2013!

This was the second largest dump by China in history with the sole exception of December 2011.

That this happened at a time when Chinese FX reserves soared to all time highs, and when China had gobs of spare cash lying around and not investing in US paper should be quite troubling to anyone who follows the nuanced game theory between the US and its largest external creditor, and the signals China sends to the world when it comes to its confidence in the US.

Yet what was truly surprising is that despite the plunge in Chinese holdings, and Japanese holdings which also dropped by $4 billion in December, is that total foreign holdings of US Treasurys increased in December, from $5716.9 billion to 5794.9 billion.

Why? Because of this country. Guess which one it is without looking at legend.

That's right: at a time when America's two largest foreign creditors, China and Japan, went on a buyers strike, the entity that came to the US rescue was Belgium, which as most know is simply another name for... Europe: the continent that has just a modest amount of its own excess debt to worry about. One wonders what favors were (and are) being exchanged behind the scenes in order to preserve the semblance that "all is well"?

The new board game of "Hot Potato" called "Bond Potato." The one holding the most UST bonds and less gold when the "dollar clock" stops loses. A twist in the game is that players must also scramble to get "physical" gold, as not all that glitters is gold but tungsten.

When the shit storm finally does hit, it will be the most predicted yet least understood disaster in history. While we may know the root causes, they have managed to create such a convoluted and complex fucked up mess trying to keep this thing afloat, there will be special schools built simply to study it. Sadly it is all deliberately complex simply for the same reason as the income tax code is so, so no one will be able to figure it out, so chaos will prevent the eye from seeing with any clarity what we face. No one will have been able to see this coming, even as it consumes us.

In terms of pure politics, it would be delightful if China would simply lower its dollar holdings by the same amount as the monthly Fed QE operations - say $55 billion/month.

That would send an big message, but also call a spade a spade.

At some point all those CPS big brains will have to rally around some kind of nationalist agenda which points a sharp stick at GS and JPM and their ruin of international financial stability.

Now, to be fair, China, Inc can and does kick the can down the road in building its sky scrapers, bullet trains and ghost cities, but they are a single party system. They can keep those loans on the books just like their Japanese progeny.

anybody notice how the $TRIN is sporting a 1.53 (which by any historical non interfering measure) should be indicating a bear ugly day - a screaming sell - ass kicking - behind the woodshed beating. Especially coupled with the $VIX. These indicators use to mean something. They sure don't anymore. Shinannigans!! And everytime I see this, it seems to me that it can only mean the FED is increasingly adding to its position to the stock market - just as it has to the Bond market - that the FED is going to mop up bonds to keep yields suppressed, and mop up stocks to keep prices from tumbling.

And the final teams of this ping-pong championship are: The Fed and the BOE. The pound is still a well trusted money, look how many foreiign buyers of UK Guilts. Isn't it ? And Dollar too, look how many US treasuries are still sold abroad, many, many to the UK.

But now its seems, that there is a limit reached endangering the BOE. But no problem, Nato in Brussels as the boss of EU Commissions President Barosso made it possible. Somehow, the tiny Nationale Bank van België is now capable and willing to purchase huge amounts of suddenly offered US treasuries. The sellers did not want or need these treasuries in their portfolios anymore. The Chinese do still have a Trillion, isn't it ? The money the tiny Nationale Bank van België needed for the purchase was just, just freshly printed from the new Fed print master lady and found somehow miracously its way to Brussels. Huh, that means trouble. When the US needs alredy such cheap and obvious tricks, then the end is maybe not anymore far.

How else will the Western countries allow China to diversify their reserve holdings? The Fed and ECB don't want Yuan. The US and Euro Govts don't want their companies and resources to be purchased. So China flips some Treasurys to the ECB. Again... big deal.

China doesn't like the USD$ anymore. What ramifications does this have for the currency if Belgium doesn't continue acquiring US Treasuries, and China keeps selling? This article suck because it doesn't tell you who bought and sold the debt. We have to assume that it was some kind of swap? Bullshit!

russia will side with china, or china will side with russia and throw profit yeilding sanctions to the western winds? the ussa will garner britain, france(?) and what's left of the broken EU support, and of course the hopeless/broke Jap's!!! (India is just a non-factor-- so corrupt, it died in 1947?)

Also the Fed, long behold, is protecting the USD/DXY from collapse. If anyone has been keeping up on current events, China has been diversifying out of US denominated assets big time and buying gold. Prelude to war.

Which asshole said "Deficits don't matter."? Oh yes the vastly intelligent and omniscient Dick 'nukes in Iraq' Cheney. Yet when this louse makes an appearance on FOX, everyone bows and scrapes like he is some kind of a messiah. Then the Foxies get mad when you call them "conservatards".

If I were China, I'd be dumping as much as I could without making waves. At least they are shrewd enough to know that.

Full faith and credit of the United States, a war mongering, over taxed, over spending, over indebted, and over medicated nation of media mind controlled ding dongs. Yeah. It's gonna slam into a brick wall, and only one in ten thousand is going to see it coming.

When a country runs a current account deficit then a domestic deflationary pressure is produced which, if left unchecked (as it should be), will cause the deficit to self-correct (made more difficult in a world of floating currencies). Seeing as this is not in the interests of trading partners, these nations prefer to recycle their surpluses back into the source nation (usually as sovereign debt purchases), thereby ensuring a continual trade imbalance can be sustained in the favor of exporters.

Should the US trade deficit (with any given nation) narrow or, through some miracle, move to surplus then the trading partner can simply cut back on US bond purchases, or let existing holdings run-off, to counteract the shift and create economic headwinds for the USA. This can continue until bond holdings and foreign currency reserve holdings have been exhausted.

Although the US-China trade deficit narrowed quite substantially at the end of 2013, this is chicken feed compared to the size of the reduction in Chinese TSY holdings, so wanting to create headwinds for the US economy is unlikely to be the primary motivation behind the decline.

As noted by the article, the US is still running a hefty deficit with China meaning that the USDs are still flowing to China. If fewer of these USDs are being recycled back into USTs, then where are they going and why?

The "where" is easy enough to see, as evidenced by the buildup of reserves. The "why" is (in my opinion) not because of a fear of the USA blowing up. If it were, then China would be seeking to divest itself of all US dollars and dollar equivalents for fear of devaluation. I believe it is more likely to be due to instability in the Chinese eurodollar system.

People often forget that there are not one, but four USD denominated fractional reserve systems in the world. The domestic US system and the foreign eurodollar system, then the shadow equivalents of both. US traditional domestic is the one that receives the most attention in the media even though it's not the largest. (Incidentally, this is the main reason I read ZH, because it's one of the few sites that pays attention to the other 3 systems, the elephant in the room).

The Fed, as the overseer of all four systems (although it didn't seem to realize it had to oversee the shadow systems until 2008), must conduct activities in all four, yet the media only ever seems to hold it accountable for the consequences of its actions in the traditional domestic system with slowly increasing appreciation of the effect of actions in the domestic shadow system. For this reason, pundits scratch their heads wondering how things like QE2 were intended to help the domestic economy. This was never the intent. QE2 was a bailout for the eurodollar system (as ZH was one of the few to notice).

So when China cuts TSY holdings without an equivalent cut in the US-China trade deficit to justify it, and Chinese USD holdings pile up inside China then the question is not "what's wrong with America?", the question is "what's wrong with China?".

TL;DR: The Chinese eurodollar system is building reserves in anticipation of Chinese defaults (primarily from the China domiciled shadow eurodollar system). Europe is buffering the side-effect. Deflation is about to bite (and Soros knows it).

So we learned that Foreign ownership of US treasuries has reached an all time high in December. In that month foreign nations were net buyers of Treasuries to the tune of $78 billons. This was in a month when the Federal Reserve was still buying $45 billons/month of US Treasuries. That makes for a combined total of $123 billons of US Treasuries.

However, I read somewhere that the US government ran a $50 billons budget surplus in December.

So how can those figures make sense? Does it mean that US banks sold to foreigners and the Fed US Treasuries to the tune of $123 billons in December alone? I have a hard time believing that. December is the month when the Federal Reserve told the world that they were moving forward with their planed tapering.

So yeah right! Foreigners jumped in to massively buy US Treasuries from US banks when the buyer of last resort told the world that they were leaving the party??!! Sorry, I don’t buy that.

Then, just to put things in perspective, all this happened at the same time that EM were net sellers of US dollars as they tried to defend their falling currencies as hard as they could.

It looks to me that it is getting increasingly difficult for the power that be to keep putting lipstick on the same old rotten pig. Their lies are now getting so out of proportions that no matter how much lipstick they apply, their rotten pig in increasingly visible.

Sure, the economic doom porn stuff now has the perceived weakness of having cried wolf for 5 years or so - but the fact that this sell by the Chinese had to be offset by such an obviously fake backdoor Fed buy through Belgium (ever been In Bruges?)...fucking Belgium... should give everyone some pause.

Expect more of the same. Even if the dollar has more life in it/least worst fiat than the average ZHers tends to think, this doesn't mean the Chinese want to live in the status quo. In fact, much of the world is eager to get away from the dollar, and that has been happening - regardless of whether TPTB can get a private central bank and IMF bondage going in Syria.

Bitcoin is likely, in part, a hedge against dollar erosion by intelligence agencies and their associated money launderers and arms dealers - a hedge in terms of value and traceability.

However, has anyone actually looked at "who" is so clearly running the Treasury Department - from the Treasurer, to the Deputy, to the Undersecs, to several of the more important departments which have to do with foreign asset control and money laundering? As with the State department, which shows similar disproportionate representation of a certain group - these are neocon and crypto neocon "deep state" people, and they probably only care about the ability to the US to project military and black ops power in order to "remake" the ME, and certainly yearn for a war on Iran for reasons having little to do with the bullshit cover story.

Anyway, China no doubt knows that the dollar is nearing the end of its lifecycle, and is being propped up via export of inflation, the petrodollar, and most of all, the sine qua non, the US military. It's inarguable that the dollar continues to lose purchasing power, which is why they're buying gold. It's inarguable that US and EU growth is premised on debt, not stronger fundamentals, which is why they, too, have decided to build airports and roads and dams and put it on the credit card too {no sense financing the rest of the world's debt-based growth}. But it also wants to have the yuan be as reserve as the dollar in East and South Asia, and apart from buying less fed debt, and selling some, I'd expect their buying spree in the US to markedly accelerate...

By buying US assets, it not only trades deteriorating fiat for real assets, it helps send a lot of dollars back into the US economy, which, in the short and perhaps midterm will help prop up the massive trade deficits China enjoys...{ie they'll ultimately get a lot of anything they spend back - which creates more reason, given the above, to sell even more treasuries}

Anyway, take or leave the above. But seriously - Belgium? Who's buying it?

I agree. China is buying up all of the gold, as many suspect, to back up a new real asset backed currency. Why not milk fiat for all that it is [not] worth? They have nothing to lose by doing what they are doing. The FED and the US government have everyting to lose. The US dollar might as well be backed by Bernake's, now Yellen's, shit stained panties.

#1) The bitcoin infrastructure cannot handle a selloff. Once the rush for the exits gains momentum, you will not be able to get out. Only those who sell early will be able to exit the market.

#2) The bitcoin infrastructure is subject to the whims of just one person running MTGox who can arbitrarily decide to shut it down whenever he thinks the market needs a "cooling period." This is nearly equivalent to a financial dictatorship where one person calls the shots.

#3) Every piece of bad news will be "spun" by exchanges like MTGox into good-sounding news. As bitcoin was crashing yesterday by 60% in value in mere hours, MTGox announced it was a "victim of our own success!" So while bitcoin holders watched $1 billion in market valuation evaporate, MTGox called it a success. Gee, then what would you call it when bitcoin loses 99%? A "raging" success?#2 Gold

Guys if you are new to this market dont believe the hype. These are just digits, there are lots of digits out there. How many digits are there? YAYa I know there are only so many of these digits but LTC, PPC, NMC, you can use all of these digits to get those digits.

uhmmmm Ukraine has just one guy running all the BTC mining worldwide, and MT-GOX has just one guy controlling all the exits world-wide, .. yep P2P my ass. Peer to Asshole would be more apt explanation of BTC.

We we do know is that in the last month the FED spent billions buying BAD JPM & GS debt from CHINA, so that chinese-momma's don't pull out all together out of the paper market in CHINA.

The truth, IMHO is that the FED has been giving FIAT all along to everybody Africa, Asia, South-America, ... and Europe.

That they would tell us that "Belgium" is the buyer is suspcious, but we do know there is only ONE buyer on PLANET earth than can print FIAT to infinite and make everyone GOOD, during the collapse of US Paper Assets.

If the USA was NOT to do then all USA paper would be sold.

Think of MT-GOX right now, its like CYRPUS, total fucking shutdown nobody can get real money back, but if you shutup and go away, MT-GOX can create infinite BTC for you to shutup.

How long can MT-GOX cover their ponzi with FREE BTC? Probably forever.

How long can the USA prop up worthless wall-street paper assets by covering bad bets with FED FIAT? Probably forever. Will some thing give? Probably not.

Only when people start getting hurt does shit happen. Right now the FED just keeps bailing every body out in secret, the off BUDGET now must be in the 100's of TRILLIONS, but who the fuck cares, it will never be paid back, its all accounting fraud.

*

Once the CHINESE have unloaded all the toxic US paper, and then once the CHINESE & RUSSIANS refuse to accept FED-FIAT, ... then the SHIT will hit the fan.

Right now the Chinese/Russians can take FED-FIAT and BUY GOLD, ... how long will this last? Until the fat woman sings.

As a belgian citizen I am completely stupified by this. Our GDP is around $500bn and we've got over 100% of that in debt. I really don't see where we would get that money from. Budgets are extremely tight and usually they are bickering about finding a couple of billion to not have an insane deficit.

Then again we have a Gay Italian guy with a red bow-tie as a prime minister so nothing really surprises me anymore.

P.S. I'm stacking gold bars with a center of Belgian Chocolates. When shit hits the fan I'll first sell the gold and then eat the chocolate for instant happiness.

I'm not sure that "Belguim is simply another name for Europe" as Tyler claims. Maybe the Belguim central bank is a marionette of the EU puppet masters.

Nevertheless, this is a strange series of events.

But at USD48 billion per month, it will take China another 26 months to sell off its warehouses of US Treasuries and there'd be a collapse in the market long before that happened, or they could sell them off over a very long period to avoid scaring the horses. It may just have been a signal from China to the US Fed that we can sell your paper as well as buy it.

This supports my acticle that delves into the games central bankers are playing in supporting their and other currencies has reached a dangerous level, we may be in the "red zone". Currencies are important chips in the commerce of government and the business of running a country.

History has shown that in the past both leaders and governments have fallen with the demise of their coin. This area of finance has become the worlds largest casino, where players have the potential to quickly suffer staggering losses. More details in the article below,

China has now restricted foreign economists from opining or participating in advisory roles on the Chinese economy (unless pre-approved 'friends' of China}. Not that these so-called experts have anything to contribute, but that is another narrative. However the impetus to this action is due to the CCP central financial planners who do not want contrary opinions nor evidence to sully their record of everything is OK, move on.

There is no better evidence that things are getting very dicey in the PRC. Expect the worse but hope for a reprieve.

CHINA looks at Japan, and see's where following the advice of USA 'experts' takes you, aka AIPAC... It takes you to Hell. Since WWII Japan has been the USA bitch vis-a-vis AIPAC, and now JAPAN is fucked.

As expected you miss the point. China is not worried about dodgy advice, they do not want the economic data to be exposed which will happen if non-approved 'friends of China' are given access to state stats.

You have, again, proven your lack of understanding of what the real issues are. China has expert economists but freedom to deploy that expertise is subjugated to the political imperatives. The Japanese or western banks are not the issue. What is an issue is your obtuse and dissembling attempt to mislead and/or appeal to the ignorant who think that saying 'fuck this' or 'fuck that' is a substitute for reality and substantive analysis.